Hungarians remain price sensitive

Zoltán Batka

Monday, October 24, 2005, 10:59

A study by PricewaterhouseCoopers (PwC) on consumption trends and regional investment opportunities of retailers and manufacturers of consumer goods, involving twenty countries in Central and Eastern Europe and the Far East, finds that consumer spending power in Hungary has risen considerably.
Although GDP growth in 2004, at 4.2%, was the lowest in Hungary among the countries included in the report (slightly below the 4.4% growth registered in the Czech Republic), and despite the fact that in terms of wages Hungary is still among the bottom five in the EU, the report found that spending power was greatly boosted as a result of increases in wages. The rise in domestic consumer power, it added, has resulted in significant changes in consumer expenditure between 2000 and 2003, reflecting the dynamism of the Hungarian retail industry.
While the proportion of expenditure on foodstuffs and soft drinks fell from 34.9% in 2003 to 30.5% in 2004, travel-related expenditure increased from 8.8% to 10.4%, the study found. In addition, ever-increasing interest was observed in household and garden accessories, as well as in furniture, it added.
In the household appliances and consumer electronics markets, prices fell following the opening of Electroworld in 2003, while competition became fiercer when a year later Saturn, a subsidiary of Metro, entered the Hungarian market.
According to the study, e-commerce is still in its initial phase in Hungary. Although the number of people with internet access increased by 20% last year, the level of electronic commerce still remains below the average for the region.
While fragmentation of the market has become a ruling tendency, with the separation of discount chains and hypermarkets both in Asia and the Central and East European region, according to the report the dominance of large shopping centers has prevailed in Hungary.
In 2004, hypermarkets had a 22% share of turnover of daily consumer items. In terms of food, the share of hypermarkets ? due to their expansion to provincial towns ? was even higher, at 26%. According to the study, the proportion of the market controlled by big retail chains is expected to increase further.
Despite progress, the Hungarian market is still highly price-sensitive, which favors discount chains specializing in cheap products, the PricewaterhouseCoopers analysis concludes. The significance of brand loyalty still falls way behind West European standards, and due to the intense price sensitivity, lags even behind East European standards, the report added.

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